Underexposed

Red Hat's new CEO, Jim Whitehurst

(Credit: Red Hat)

Some folks paused when they heard an airline executive was taking over as Red Hat's new chief executive. But Jim Whitehurst thinks his job as Delta Air Lines' chief operating officer will serve him in good stead.

In an interview Friday, the 40-year-old said he believes his experience running much of a 50,000-person company and focusing on top priorities will serve the Linux seller well as it tries to increase revenue.

Whitehurst also has at least a touch of the open-source zeal of his predecessor, Matthew Szulik, who left the CEO job January 1 because of family medical difficulties but who remains chairman of the Raleigh, N.C.-based company. Whitehurst has been a Linux user since the Slackware days of the mid-1990s, and he's already got the open-source sales pitch down pat.

He faces plenty of challenges, to be sure. The integration of the JBoss Java server software has been a rocky process, Red Hat has no shortage of competitors--some of them also close allies--and Whitehurst will have to make the abrupt shift from Delta Air Lines' bankruptcy-induced bunker mentality to the growth challenges of Red Hat.

But Whitehurst seemed nothing if not game in a conversation today. Here's an edited transcript of our chat.

How did you first hear about this Red Hat job?
Whitehurst: It was from a recruiter, a cold call from Nosal Partners. I was thrilled and basically said, "When can I get up there?" (Red Hat Chairman) Matthew (Szulik) and I met early on a Sunday morning two days later. We hit it off well.

What was your first reaction when you heard about Red Hat? Was it "Who?" or was it "This is the opportunity I've been waiting for"?
Whitehurst: It was "This is the opportunity I've been waiting for." I've used Linux since the mid- to late 1990s at home. I screwed around with Red Hat since before the enterprise version and it was free. I've been using Fedora for quite awhile. I'm very familiar with the products and the company. As my wife said, it was the first thing I came home with absolutely lit up about.

Why did you leave Delta?
Whitehurst: I was COO at Delta throughout the bankruptcy. Delta emerged in May, and I was the leading internal candidate to be CEO. The new board of directors decided to go outside. I don't have any issues with that. When the new CEO came in, frankly, the entire company other than finance reported to me, and it wasn't reasonable for him to come in and have one report. He needed a wide berth. We agreed it would be a good thing for me to go for him to be able to take the reins fully. It was very amicable.

When you look at Delta vs. Red Hat, there's a dramatic difference in business models. Should your employees, customers, and investors be concerned that somebody from an old-line industry is taking over at a software company with a fairly revolutionary business model?
Whitehurst: I don't think so. I'm now a Red Hat shareholder. I do think I bring a set of skills that will augment skills here. As a large customer of technology at Delta, I think have a good sense of what CIOs look for. Airlines in general are very reliant on technology, so having a customer perspective can be very helpful. This company has massive opportunity. One of the big issues is how to scale the company. I bring some big-company process skills to ensure this company has the capability to grow from $500 million to $5 billion (in annual revenue) and continue to run smoothly and to offer excellent service.

Another parallel is that airlines have very low barriers to entry. The way the established companies have developed is they're not particularly customer-friendly. No one talks about their wonderful airline experiences. A thrilling thing about Red Hat is that with open source, we don't have big barriers to entry, and it's a chance to define a company around customer service. We'd better never lose our focus on the customer, because you can't lose it and get it back. That's why I feel good about competing against the proprietary-software guys. Service used to be an afterthought, it was the hassle that you had to do if you wanted to sell the next version of your software.

Where did Delta use Red Hat software and where did it not?
Whitehurst: I want to be a little careful because I don't know what Delta has disclosed. There are some specific systems there that ran on Red Hat, some pretty big mission-critical pieces of software.

Is it fair to say it wasn't the core of the operation?
Whitehurst: The core of the systems were the old original TPF (Transaction Processing Facility) systems that have been around forever--the things the airlines know they'll have to migrate off of over time. But while we were all bleeding was not the time to do it.

You talked about being able to scale Red Hat. Red Hat has grown a lot, but the big software IPO in 2007 was VMware, which has grown a lot more and a lot faster. It seems like proprietary software isn't dead yet.
Whitehurst: I don't think proprietary software is dead by any stretch of the imagination. But a couple comments. One thing we'll talk about in early days is innovation and making sure Red Hat leads innovation and drives innovation in open source. Technology is an industry where there's a massive first-mover advantage. Our virtualization is excellent, but we weren't there first. VMware was and has triple our revenues and a gazillion-dollar market cap. Innovation and being there first are extremely important. We were the first enterprise Linux and we have 80-something percent share of the enterprise Linux market. Being first is important. Making sure Red Hat is a leader in the open-source community, to make sure open source is not only iterating but also innovating, is important.

Szulik had a good soapbox about open-source software. Will you be taking on his evangelism?
Whitehurst: I'm very passionate about open-source. It's a fundamentally better way to develop software. Open source is a truly disruptive technology and will continue to take share and grow. Open source is a good. By us doing well, we're also doing good. Democratizing content and democratizing information has an incredibly important benefit to society, and we play a key role in doing that. Does that make me a zealot or not? I don't know.

Matthew is not going away. He'll continue to work with me and continue to be a key spokesman for open source.

What kind of changes can we expect you to bring to Red Hat? How is your management style different?
Whitehurst: I think he and I share similar traits. I'm very open and informal. It's hard for me to say what changes will come. In terms of strategy, I'm brand new. I will say I have a couple of biases. One is focus, focus, focus. This is a company that is almost encumbered by the opportunities we have. But chasing 1,000 things and doing none of them well won't be good for us or be good for open source. Making sure we nail the three or four things we do and absolutely nail them is going to be critical. You won't see us going into five or six new business, but you will see us redoubling focus on several.

JBoss has been a difficult acquisition. Is this a situation like with (Sun Microsystems CEO) Jonathan Schwartz, where you show up after some of the tough stuff has been fixed and you get to take credit for it, or is this something where there needs to be a lot more work?
Whitehurst: I hope I'm showing up to take credit (laughing). Timing in life is everything. As we talked about the third quarter, we're getting some real momentum with JBoss and very good about it. Clearly that is part of our core and we'll have a lot of focus going forward. Does that mean change or not? I don't know. Things are looking quite good now.

Can we look for a push for JBoss on Windows or on various versions of Unix?
Whitehurst: JBoss runs on Windows now.

Right, but how about a bigger marketing push, for example?
Whitehurst: It's too early for me to start talking about strategy at that level. What I will say is that it's simple. Does it add value to our customers that our customers want? There are two things I'm unwavering about: one is we are open-source and we will continue to be open-source; second, every single decision we make is filtered through "is this adding value for our customers?"

Another possible priority is Linux on the desktop. It's something Red Hat has tried for years to make into a reality. Is that something Red Hat is going to focus on and redouble efforts on, or is it one of the things you're going to let fall by the wayside for a few years?
Whitehurst: Hey, I just found the bathroom and the coffee, so I'm not calling exactly what's in vs. out. That's something that as a management team we'll go through a rigorous process and jointly determine.

There are some obvious competitors out there, like Novell and Microsoft, but I'm more interested the coopetition companies like IBM and Oracle that are both partners and competitors. Do you see those companies more as a long-term threat or long-term ally? IBM has a strong server business and Oracle has a strong database business, but they also have straight-up competing products, and Red Hat is expanding into those companies' turf.
The answer is yes and yes. They are absolutely threats to us, and they are also absolutely partners. The airline industry no different. (Delta) had an alliance with Continental, Northwest, and SkyTeam where we partner in some areas, and we are ferocious, brutal competitors in others. It's the same thing with IBM and Oracle. There is no black and white in this world. It's all shades of gray.

Correction 10:05 a.m. PST: This blog initially misstated when Red Hat made the announcement. It was Thursday.

Red Hat is working on gaining the Common Criteria certification for its JBoss Enterprise Application Platform for running Java software, the company announced Thursday.

Such certification is a significant step in gaining acceptance among governmental and international customers. The Linux seller is seeking Evaluation Assurance Level 2 across multiple operating systems, not just Red Hat Enterprise Linux, a company representative said.

RHEL 5, the company's main product, currently has EAL 4+ certification, a higher level, on both Hewlett-Packard and IBM servers, and SGI has EAL 3+ and is seeking 4+ certification.

Red Hat has been getting more active in the Java arena. It acquired the JBoss software in 2006 for running Java Enterprise Edition software on servers, though the company has had trouble meeting its JBoss financial targets. And Red Hat announced a partnership with Java creator Sun Microsystems on Monday under which it will contribute to the core Java Standard Edition software project.

First came Fake Steve Jobs. Next were a host knockoffs, including Fake Steve Ballmer, Fake Bill Gates, Fake Jonathan Schwartz, Fake Scott McNealy and Fake Larry Ellison.

former JBoss CEO Marc Fleury

(Credit: CNET Networks)

But with the feisty language of Marc Fleury, who retired from JBoss after Red Hat acquired the company he founded and formerly led, there's no need for a fake.

Fleury no longer has an open-source Java server software company to run, but he hasn't disengaged from the industry. Look no further than Fleury's post about Oracle's $6.66 billion offer this week to acquire BEA Systems.

BEA Chief Executive Alfred Chuang, he said, "probably already super-glued his naked chest to the BEA boardroom table. It is going to get nasty and he will be dragged out kicking and screaming. Alfred will mumble something about not wanting to be Larry's PowerPoint bitch, or waxing his boat, or some other nonsense. But Larry is going to make sushi of that board and will feed it to the koi fish he has in his compound."

It gave me a chuckle, though as with Fake Steve Jobs, Real Marc Fleury has recycled some turns of phrase, as is the case with the PowerPoint reference.

It's not all fun and games. Fleury has a reasonable analysis of the Oracle offer, which by the way BEA rejected as too low.

It's not the first time Fluery has razzed his rivals. He dissed Chuang "the Merciless" earlier this month after the BEA exec's remark that "I am not ready to be a DJ," an apparent jab at Fleury's post-JBoss musical interests.

Fleury's riposte: "You just keep monetizing that maintenance stream, Alfred. Even if your latest achievement is vying for the software industry's 'refusal to go gently into the good night' awards, I am very proud that I got under your skin."

And in August, Fleury tangled with Cameron Purdy, the CEO of Tangosol until Oracle's acquisition in March. Purdy posted a blog entry addressed to Fleury that said he's enjoying his active career at Oracle and closed with the words, "give my regards to the wife and kids."

Fleury responded. "Do me a favor, if we are going to continue being pen pals, leave my kids out of this. I don't know you, you freak. And, while you're at it, please address me as Doctor Fleury, and no, that's not my DJ name. I didn't suffer through ten years of differential equations to be talking on a first name basis with some random honky."

And, he added, "No I don't currently miss the glamorous life in the fast lane, as you describe it--jetting around talking to 'very important' customers, telling them how 'incredibly successful' they are going to be with my software. I used to do that before I got acquired."

Update: I added some detail about Red Hat's disappointment with JBoss revenue and executive changes.

Red Hat reported another quarter of reasonably steady financial growth on Tuesday, with net income that grew 12 percent to $18.2 million and revenue that grew 28 percent to $127.3 million.

Excluding stock-option compensation and other factors, net income was $36.9 million, or 17 cents per share, meeting the average expectation of analysts surveyed by First Call. Revenue was a smidgen above their estimate of $125.1 million, and its stock rose 77 cents, or 4 percent, to $19.66 in after-hours trading.

This isn't generating piles of money on the scale of Microsoft, but the Redmond, Wash., rival might take note of Red Hat's capitalistic advances before further declarations that "the open-source development model has yet to demonstrate the ability to support profitable software businesses that can drive the coordinated research and testing necessary to sustain innovation."

The company sells support subscriptions to its Red Hat Enterprise Linux operating system and, more after an acquisition in 2006, to its JBoss open-source Java server software. Of Red Hat's revenue for its second quarter of fiscal 2008, which ended August 31, $109.2 million was from subscriptions, a 29 percent increase.

However, not all believe the JBoss deal is going swimmingly. Credit Suisse analyst Jason Maynard downgraded Red Hat from "outperform" to "neutral" Monday. "We believe our thesis of improved field execution and meaningful JBoss acceleration won't materialize and deliver the anticipated upside to our forecast," he said. "Our checks indicate that the organization continues to be in a state of flux as the company struggles through its transition to a multi-product company."

In a conference call Tuesday, Chief Executive Matthew Szulik said he wasn't happy with the JBoss revenue, either.

"The rate of JBoss bookings and revenue to date has not met my expectations," he said. The company expected it to grow at twice the rate its core RHEL business has, but so far, it's about the same. "We know we can do much better...We will accelerate JBoss growth in the second half of the fiscal year.

Red Hat also has changed its marketing. The former vice president of corporate marketing, Tim Yeaton, is no longer with the company, Szulik said in an interview. His successor is Michael Chen, who spent the last three years setting up Red Hat's Chinese operations.

In sales, marketing and finance, Red Hat over the past two years has moved to a more decentralized model in which regional general managers are responsible for their respective areas.

In the technology realm, Red Hat is making further changes, dividing operations into three areas: infrastructure such as file systems and the operating system, middleware such as JBoss, and online work such as the Red Hat Exchange software partnerships. The latter is led by Donald Fischer, Szulik said, and the other executives probably will be announced in the next 30 days.

Red Hat generated $63.7 million in cash flow from operations, with total cash and cash equivalents now at $1.3 billion. Red Hat might dip into that reserve though: the Raleigh, N.C.-based company said its board authorized spending up to $250 million to repurchase stock and debentures.